Saturday, 16 May 2009

I came across this recent question from a landlord who owns a leasehold property posted on a property blog.

"I own a leasehold flat above a commercial property, which is owned by the freeholder of the premises. Under the lease's terms the freeholder must insure the property; I am responsible for 50 per cent of the premium. This year I asked to see the policy and was shocked at the extent to which the freeholder had apparently undervalued the premises. The cost of rebuilding my flat alone exceeds the sum insured. What can I do?"

There are methods for a landlord to require that they have adequate landlord block insurance. The best way is to take the freeholder to the Leasehold Valuation Tribunalwho will be able to adjudicate on such matters.

"Where it is the landlord's obligation to insure, the Schedule to the Landlord and Tenant Act 1987 gives important rights to leaseholders. The leaseholder is entitled to ask for basic information about the insurance policy and the landlord must provide a summary of the policy within 21 days. Similarly, the leaseholder has the right to inspect the policy and any “associated documents” free of charge. If the landlord fails to comply, he commits a criminal offence and he can be fined up to £2,500. Where the leaseholder has to insure, there are even more extensive rights. The leaseholder is entitled to shop around for the most appropriate insurance policy. If the landlord insists on insurance being placed with a less appropriate insurer, the leaseholder can apply to the court or a Leasehold Valuation Tribunal requiring the landlord to nominate another insurer.

In your case, the obligation is on the landlord to insure, and you have a number of options. If the insurance policy does not satisfy the strict requirements of the lease, you can go to court for a declaration that the landlord has broken his obligations. A more practical option may be to apply to the Leasehold Valuation Tribunal to appoint a statutory manager of the property - and the manager can then be given the task of providing proper insurance cover. Failure to provide adequate insurance is specifically set out as a ground for the appointment of a statutory manager under the Landlord and Tenant Act 1987, and there are even provisions in that legislation for an emergency appointment in urgent cases.

Finally, you can object to paying an insurance rent or service charge on the ground that the premiums were not “reasonably incurred” under the Landlord and Tenant Act 1985."

The writer is a barrister at Tanfield Chambers. E-mail your questions to: brief.encounter@thetimes.co.uk